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Arkansas LLC Operating Agreement

Your Arkansas LLC operating agreement is a legal document that establishes rules for how your LLC will handle procedures like voting, allocating profits and losses, management, and even—should it ever come to this—dissolution.

An operating agreement is an internal document, but that doesn’t make it any less important than documents filed with the state. In fact, adopting a strong operating agreement is essential. That’s why we at Northwest offer a range of free, attorney-drafted Arkansas operating agreement templates to help suit your business needs.

Why should an Arizona LLC have an operating agreement?

An Arizona LLC should have an operating agreement because a company cannot act for itself. In order to operate, LLCs require real humans (and other entities) to carry out company operations.

While Arkansas Code § 4-38-105 to 107 describes what an operating agreement can and can’t do, it doesn’t say the state requires one. But don’t be fooled, your operating agreement is one of your most important internal documents. Here’s why:

1. Your operating agreement proves you own your LLC.

While your Arkansas Articles of Organization require you to include the name of one member, that means only one person can use your articles of organization as proof of ownership. Your operating agreement, however, includes the names of all members. And because it’s a legal document, it can be used by all members as proof of ownership. You’ll need it to open a business bank account.

2. An operating agreement can help reinforce your limited liability status.

To benefit from limited liability, all business owners must follow certain formalities to show that their company is its own legal entity separate from its members. One way to do this is to open a bank account for your LLC. Another is to create (and follow) an operating agreement.

3. An operating agreement can help prevent misunderstandings.

Disagreements happen. Misunderstandings are almost inevitable. But with an operating agreement to establish agreed-upon rules and procedures for your LLC, you can help prevent those misunderstandings from slowing (or stopping) your business.

4. An operating agreement can override Arkansas’s default laws.

If you don’t have an operating agreement, Arkansas’s state statutes will automatically set the rules and procedures for your business. The problem is that these default statutes might not work for your LLC. By creating an operating agreement for your LLC, you ensure that your business operations reflect the needs of your company.

Arkansas Case Law

We asked our lawyers for an example of how an operating agreement can make or break your LLC. Here’s what they said.*

“Consider the case of Vicentic v Simpson, where one member claimed to be the sole member of an LLC, despite listing a second member as part of the LLC in license and permitting applications along with other documents. The member claiming to be the sole member conceded that the second member was initially part of the LLC, but was later removed as a member. Given this admission, among other things, the courts ruled that no operating existed for the LLC since the operating agreement was never presented to the second initial member.

“Assuming good faith on all parties, this case represents an excellent example of why it is important for business owners to understand the areas through which they traverse and why it is important to present the LLC rulebook to all LLC members. Had the members actually discussed the parameters and circumstances surrounding the LLC governance, the original misunderstanding would likely have been avoided and valuable resources could have been preserved for more fulfilling purposes. For these reasons (and more), a reasonably prudent business owner would (and should) actually adopt and maintain an operating agreement.”

What is included in an Arkansas operating agreement?

Technically, your Arkansas operating agreement can include anything (within the law) not already covered by Arkansas’s state statutes. But a strong operating agreement is essential, and should include information about:

  • Transfer of membership interest
  • Voting rights and decision-making powers
  • Initial contributions
  • Profits, losses, and distributions
  • Management
  • Compensation
  • Bookkeeping procedures
  • Dissolution

Arkansas LLC Operating Agreement Template

Here are our free operating agreement templates, attorney-drafted specifically for Arkansas LLCs. Find one that suits your LLC’s management structure.

FAQs

Is an operating agreement required in Arkansas?

No. Arkansas’s state statutes don’t include any language to suggest an operating agreement is required for Arkansas LLCs. However, you’ll need an operating agreement for several important tasks, like opening a bank account and even renting property.

Do I have to file my operating agreement in Arkansas?

No. Your operating agreement is an internal document, which means you’ll keep it on file with your own LLC documents.

Does a single-member LLC need an operating agreement?

Yes. Even though it’s strange to consider creating an agreement with yourself, by yourself, and for yourself, your operating agreement is an important legal document. It’s even essential for tasks like opening a bank account and—perhaps most importantly—maintaining your limited liability status.

*This is informational commentary, not advice. This information is intended strictly for informational purposes and does not constitute legal advice or a substitute for legal counsel. This information is not intended to create, nor does your receipt, viewing, or use of it constitute, an attorney-client relationship. More information is available in our Terms of Service.

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